Taking Profit | Woodside Energy | Auckland International Airport

23 November 2022

New Zealand Market Movers 

The New Zealand market (NZX 50 Index, -0.2%) fell slightly on Tuesday, with Ryman Healthcare (-7.1%) dragging the index lower. As noted in an earlier report, The company is experiencing cashflow issues arising from a less liquid housing market meant net debt rose +$400m over the half to $3 billion.

Argosy Property (+3.7%) advanced on the day after releasing its half-year results for the six months ending September 30. More to come on this in tomorrow’s Stock In Focus

Sky Television (+1.4%) lifted after the company announced that it had implemented its capital return of ~$70 million to its shareholders. 

Focus today will be the Reserve Bank of New Zealand’s interest rate hike at 2.00pm. The potential hike of 75-basis-points would take the Official Cash Rate to 4.25% from the current 3.5%.

Australia Market Movers 

The Australian market (ASX 200 Index, +0.6%) outpaced global markets on Tuesday on the back of Energy (+2.6%) and Materials (+1.2%). Crude Oil (+2.3%) rebounded over night after Saudi Arabia denied rumors it will increase oil production, helping Woodside (+2.9%) and Santos (+2.2%) advance on the day. 

Europe Market Movers  

European markets (Stoxx 600 Index, +0.8%) climbed to a 3-month high on Tuesday, benefiting from the bump in Oil and Gas (+4.7%) and Mining (+2.7%) stocks. 

US Market Movers 

US markets (S&P 500 Index +1.4%) rose on Tuesday after digesting the recent comments of several US Federal Reserve speakers. On Monday, Cleveland Fed President Loretta Mester noted that she would support reduced interest rate hikes going forward in response to promising inflation data that indicates peak inflation has passed. 

Retail stocks are among the best performers on the day after Abercrombie & Fitch (+21.7%) and Best Buy (+12.8%) beat analyst estimates in their respective earning calls before the Tuesday bell. Dollar Tree (-7.8%) was a notable underperforming in the sector after forecasting full-year earnings to be in the lower half of its prior guidance.

Stock In Focus: Woodside Energy (WDS.ASX)

Woodside Energy shares have had a strong run, even after we downgraded it to a HOLD, end of August, now that it trades at fresh post covid highs and 6-year high we downgrade it down to neutral. While paying a decent dividend we see some downside risk if commodity prices were to fall as economic activity is tipped to slow down over the near-term from central banks tightening policies around the globe.

We like the business fundamentals as a whole but not the valuation at the current juncture so we will sell down half our position in our Australian portfolio from 6% down to 3%, crystalising gains and moving the funds into cash as we prepare for a volatile time ahead.

Stock In Focus: Auckland International Airport (AIA.NZX)

A surprise rally sees us feeling comfortable taking profit from Auckland International Airport. we see earnings recovering over the medium-term as international travel rebounds however not quite up to the peak pre-covid levels, while a much high interest rate environment now than pre-covid means it doesn’t justify pre-covid multiples or valuation. Especially in anticipation of another big rate hike from the RBNZ today
For that reason, we downgrade Auckland International Airport from Hold to Neutral and would encourage investors that followed our buy recommendation, and then continued to hold to take profit at current levels. At current levels we prefer Tourism Holdings and Sky City as our tourism rebound plays.

What Markets will be Watching this Week (UTC +13)

Monday 
EA ECB President Lagarde Speech 

Tuesday 
Argosy Property earnings 

AU RBA Govenor Philip Lowe Speech   

Wednesday 
Oceania Healthcare earnings 

Tower earnings 

NZ RBNZ Interest Rate Decision  

Thursday 
Rakon earnings 

Pacific Edge earnings 

US Durable Goods Orders MoM OCT  

US FOMC Meeting Minutes 

Friday 
US Thanksgiving Holiday (US markets closed) 

Saturday 

The New Zealand market (NZX 50 Index, -0.2%) fell slightly on Tuesday, with Ryman Healthcare (-7.1%) dragging the index lower. As noted in an earlier report, The company is experiencing cashflow issues arising from a less liquid housing market meant net debt rose +$400m over the half to $3 billion.

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